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In looking at Groupon's (GRPN) metrics, one can focus on subscribers or customers. It's more revealing to look at actual customers. For example, at last count Linkedin (LNKD) had 102 million subscribers and 75 million hit the site on a monthly basis for the March 2011 quarter. Renren (RENN) produced similar data.

Only 19% of GRPN's subscribers were customers as of the March 2011 quarter. S-1 page 41

THE GOOD

For the March quarter GRPN spent $180 million for subscriber acquisition and acquired 32.5 million new subscribers. Customers increased by 6.8 million.

The acquisition cost per customer for the March quarter is $26.47 ($180 million / 6.8 million), although some customers may have been prior subscribers. The gross profit per customer in the March quarter was $17.08.

If those numbers remain static (and they won't remain static based on competition and other factors), the time to breakeven (on a gross profit basis) for acquiring new customers is less than five months.

THE BAD

GRPN's CEO is young, inexperienced, somewhat arrogant and apparently believes his own press releases. That kind of kind of leadership behavior is dangerous and risky for an emerging company and is a setup for being blindsided.

Current and potential competitors include public companies such as Google (GOOG), Amazon (AMZN), Facebook, Microsoft (MSFT). Open Table (OPEN), Travelzoo (TZOO), The Knot (KNOT); as well as many private companies including Living Social, Yelp, CouponMom, Thrillist, Lifebooker, BuyWithMe, Bloomspot, WagJag, DealFind, DealCatcher, Daily Ticket, etc. etc. etc.

Overall, GRPN's average revenue per customer for the March 2011 quarter is down 10% to $40.80 from $45.11 compared to the December 2009 quarter. Groupons sold per customer dropped 13% to 1.78 from 2.04.

Regarding specific markets, we analyzed data provided in GRPN's S-1 filing for the Chicago, Boston, Berlin and London markets. S-1 page 74 Chicago and Boston were the first two markets established by Groupon.

The rate of growth headed south for almost all metrics. In particular, average revenue per customer dropped and Groupons sold per customer also dropped.

Also, it's very doubtful that Groupon can maintain the very high current international price points, based on comparing London and Berlin market data with Chicago and Boston data.

For the March 2011 quarter average revenue per customer varied from $34.12 in Boston to $138.68 in London followed by $87.88 per customer in Berlin. Chicago's average revenue per customer was on the low side at $38.90. We expect to see much further deterioration in revenue per customer in London and Berlin, at the very least.

Groupons sold per customer for the March 2011 quarter were: Chicago, 1.7; Boston, 1.4; Berlin, 3.3; London, 2.8. With more competition in the international markets, Groupons sold per customer can be expected to decline, perhaps to the levels of more mature markets such as Chicago and Boston.

Yes, GRPN was an initial novelty and first mover and captured the low hanging fruit. Now, however, there is lots of current and potential competition. According to the laww of supply and demand, GRPN's price points (average revenue per customer) are destined to continue to fall, particularly in markets that appear overpriced, such as London and Berlin.

CHICAGO

Not good news. For comparison purposes we calculated the rate of growth for the March 2011 quarter versus the December 2010 quarter. Then we calculated the rate of growth for the March 2011 quarter versus the December 2009 quarter. Finally we compared the two growth rates.

The growth rates slowed in almost every category. Revenue per customer dropped 26% to $38.90 from $52.36, comparing the March 2011 quarter with the December 2009 quarter. Groupons sold per customer dropped 15% to 1.7 from 2.0.

Mrch 2011 qtr

Mrch 11 qtr

March 2011

vs

vs

CHICAGO

Quarter

Dec 2010 qtr

Dec 09 qtr

Subscribers

1,504,978

37%

918%

Cumulative customers

552,712

35%

645%

Cus % of subscribers

37%

-1%

-27%

Featured merchants

759

61%

479%

Revenue (in millions)

$21.5

27%

451%

Groupons sold

950,689

40%

536%

Groupons sold per customer

1.7

4%

-15%

Rev per customer…

$38.90

-6%

-26%

BOSTON

Not good news. For comparison purposes we calculated the rate of growth for the March 2011 quarter versus the December 2010 quarter. Then we calculated the rate of growth for the March 2011 quarter versus the December 2009 quarter. Finally we compared the two growth rates.

The growth rates slowed in almost every category. Revenue per customer dropped 31% to $34.12 from $49.13, comparing the March 2011 quarter with the December 2009 quarter. Groupons sold per customer dropped 8% to 1.42 from 1.54.

Mrch 2011 qtr

Mrch 11 qtr

March 2011

vs

vs

BOSTON

Quarter

Dec 2010 qtr

Dec 09 qtr

Subscribers

778,936

39%

537%

Cumulative customers

272,548

38%

644%

Cus % of subscribers

35%

-1%

17%

Featured merchants

456

59%

424%

Revenue (in millions)

$9.3

31%

417%

Groupons sold

388,178

37%

588%

Groupons sold per customer

1.42

-1%

-8%

Rev per customer…

$34.12

-5%

-31%

BERLIN

Not good news. For comparison purposes we calculated the rate of growth for the March 2011 quarter versus the December 2010 quarter. Then we calculated the rate of growth for the March 2011 quarter versus the June 2010 quarter. Finally we compared the two growth rates.

The growth rates slowed in almost every category. Revenue per customer dropped 20% to $87.88 from $110.23, comparing the March 2011 quarter with the June 2010 quarter, the first reported quarter. Groupons sold per customer dropped 36% to 3.3 from 5.5.

Based on the revenue per customer data from Chicago and Boston, it's reasonable to expect a much further decline in revenue per customer for Berlin, as the Berlin market becomes more competitive. Groupons sold per customer may also decline, as they have for Chicago and Boston.

Mrch 2011 qtr

Mrch 2011 qtr

vs

vs

BERLIN

June '10

Sept '10

Dec '10

March '11

Dec 2010 qtr

June 2010 qtr

Subscribers

92500

152800

261200

396000

52%

328%

Cumulative customers

9072

23007

40992

69412

69%

665%

Cus % of subscribers

10%

15%

16%

18%

12%

79%

Featured merchants

108

268

303

416

37%

285%

Revenue (in millions)

$1.0

$2.4

$4.5

$6.1

36%

510%

Groupons sold

47,068

89,321

124,585

229,279

84%

387%

Groupons sold per customer

5.2

3.9

3.0

3.3

9%

-36%

Rev per customer

$110.23

$104.32

$109.78

$87.88

-20%

-20%

LONDON

Not good news. For comparison purposes we calculated the rate of growth for the March 2011 quarter versus the December 2010 quarter. Then we calculated the rate of growth for the March 2011 quarter versus the June 1010 quarter. Finally we compared the two growth rates.

The growth rates slowed in almost every category. Revenue per customer dropped 16% to $138.68 from $165.31, comparing the March 2011 quarter with the June 2010 quarter, the first reported quarter. Groupons sold per customer dropped 42% to 2.8 from 4.5.

Based on the revenue per customer data from Chicago and Boston, it's reasonable to expect a much further decline in revenue per customer for London, especially as the London market becomes more competitive. Groupons sold per customer may also decline, as they have for Chicago and Boston.

Mrch 2011 qtr

Mrch 2011 qtr

vs

vs

LONDON

June '10

Sept '10

Dec '10

March '11

Dec 2010 qtr

June 2010 qtr

Subscribers

159156

423660

993622

1602968

61%

907%

Cumulative customers

10284

34182

75897

144933

91%

1309%

Cus % of subscribers

6%

8%

8%

9%

18%

40%

Featured merchants

102

232

294

432

47%

324%

Revenue (in millions)

$1.7

$5.4

$10.8

$20.1

86%

1082%

Groupons sold

49,564

126,916

237,756

402,086

69%

711%

Groupons sold per customer

4.8

3.7

3.1

2.8

-11%

-42%

Rev per customer

$165.31

$157.98

$142.30

$138.68

-3%

-16%

Source: Groupon: The Good and the Bad